In vertebrates, as in other animals, the ectoderm has two primary fates, epidermis and central nervous system (CNS). The goal of this project is to understand the mechanisms that determine how ectodermal cells choose between these two pathways, and how the ensuing tissue patterning and differentiation are regulated. It has been well established that signaling by bone morphogenetic proteins (BMPs) is the primary event that initiates epidermal development in the amphibian embryo. The experimental approach taken by this laboratory has been to use dependence upon such signaling as a criterion for identifying genes that may regulate the epidermal/neural developmental program. Attention has been focused on the Distal-less homologs Dlx3, 5 and 6 and on the transcriptional activator AP-2. Additional genes are being sought using subtractive hybridization/microarray techniques. We have found that the three Dlx genes are differentially regulated by a graded response to BMP signaling, and that this can account for at least some of the major features of the spatial pattern of Dlx gene expression in the gastrula. Dlx3 appears to be involved in establishing the lateral boundary of cranial neural crest induction, in a manner similar to the anti-neural properties we previously discovered for this gene. Interestingly, this inhibitory function does not appear to involve direct regulation of transcription by Dlx3, but is more likely dependent upon protein-protein interactions. The roles of Dlx5 and Dlx6 remain obscure, but the possibility that this subfamily of homeobox genes function to interpret a morphogenetic gradient in the embryo is very intriguing. The findings that AP2 expression is BMP-dependent, and that over-expression of this factor can rescue epidermal gene activity in BMP-disabled ectoderm are also highly interesting, as this gene was identified by our laboratory several years ago as a potential epidermal regulatory factor, using a promoter analysis approach. We have also found that AP2 plays an important role in the development of neural crest cells, and are now examining the interactions between AP2, Dlx3 and other factors at the protein-protein level, and using microarry analyis to search for target genes regulated by these factors.